Nikola Corporation NKLA were trading slightly higher Wednesday afternoon during another volatile trading day following allegations of fraud by short seller Hindenburg Research last week.
Nikola bulls are hoping the share price has found support following news that both the SEC and the Department of Justice are probing the company, but former hedge fund manager Whitney Tilson believes the ultimate outcome for Nikola and its co-founder Trevor Milton will be a worst-case scenario.
At this point, Nikola and Milton have responded to Hindenburg's accusation of “a litany of material false statements made by Nikola's Founder and Executive Chairman, Trevor Milton.”
The electric vehicle developer said the Hindenburg report was timed opportunistically after the announcement of Nikola's partnership with General Motors and the resulting positive stock reaction.
Nikola called Hindenburg's report "false and defamatory" in a Monday press release.
The short report "was designed to provide a false impression to investors and to negatively manipulate the market in order to financially benefit short sellers, including Hindenburg itself,” according to Nikola's statement.
Nikola’s Rebuttal Lackluster? The initial Hindenburg report came out just a day after Nikola announced a $2-billion production deal with General Motors Company GM.
Hindenburg has since responded to Nikola, claiming that the company’s rebuttal addressed only 10 out of 53 questions the short seller posed in the initial report.
Nikola’s response didn’t debunk any of Hindenburg's initial claims, the short seller said.
“Instead it either confirmed or sidestepped virtually everything we wrote about, and in some cases raised new unanswered questions,” Hindenburg wrote in its response.
Tilson Speculates About Criminal Charges: In his daily newsletter on Tuesday, Tilson said a friend told him this week he believes it’s only a matter of time before Nikola and Milton face criminal indictments.
“I agree, and confidently predict that General Motors will end the partnership with Nikola that it announced last week, Nikola's stock will collapse, and Milton will end up behind bars for securities fraud,” Tilson said.
Nikola had not responded to a request for comment from Benzinga on Tilson's statements at the time of publication Wednesday.
On Monday, GM CEO Mary Barra said the company had a “very capable” team vet Nikola prior to the partnership being struck.
On Wednesday, JPMorgan reiterated an Overweight rating on Nikola and said the company’s CFO Kim Brady told them that Nikola is experiencing “no loss of momentum with existing partners, prospective customers, suppliers and employees.”
Benzinga’s Take: Nikola’s share price has taken a big hit from where it peaked following the GM deal announcement, but it is still a long way from a complete collapse, as Tilson predicts.
The ultimate fate of the company hinges on whether Milton was being intentionally deceptive in his claims about the company and its technology or simply being aggressively optimistic about its future capabilities.
Photo courtesy of Nikola.
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